Mounting Struggles Put Swvl At Risk Of Being Booted From The Nasdaq

Swvl, the Egypt-born UAE-based mobility startup that went public via a SPAC, is facing the latest threat to its status as a listed firm having received a warning for failing to file its 2022 annual report with the Nasdaq.

The company issued a statement declaring that it received a notice from the Nasdaq on May 4 indicating that, as a result of not having timely filed its Annual Report for the fiscal year ended December 31, 2022, it failed to comply with the Nasdaq Listing Rule 5250(c)(1), which requires timely filing of all required periodic financial reports with the Securities and Exchange Commission.

“Nasdaq requires that the Company submit a plan no later than July 3, 2023, to regain compliance. If Nasdaq accepts the plan, Nasdaq can grant the Company an extension of up to 180 calendar days from the due date … to regain compliance,” reads part of the Swvl’s statement acknowledging the situation while maintaining it will continue to trade on the Nasdaq for now while hoping to comply with other continued listing requirements.

A provider of tech-enabled mass transit solutions for individuals and institutions, Swvl (NASDAQ: SWVL) achieved a prestigious feat when it went public in July 2021 via a SPAC and became known as “the Middle East’s first USD 1.5 B unicorn to list on the Nasdaq.” But it didn’t take long before Swvl took a battering in the markets following economic headwinds and weak performance. Its market value currently stands at around USD 6 M, a staggering drop from the billion-dollar-plus valuation it once boasted.

The latest notice Nasdaq served the company, the third since November last year, suggests ongoing difficulties which Swvl attributes to uncertainty in the global economic environment and volatility in capital markets, which have impacted its ability to generate cash from operating activities, fund working capital, and service its commitments. 

“Due to the Company’s currently available resources required to prepare the Company’s audited financial statements and annual report on Form 20-F for the year ended December 31, 2022 (the “2022 Form 20-F”), the Company is unable to file its 2022 Form 20-F within the prescribed time period,” Swvl revealed in a recent filing, adding that it intends to file its 2022 financial statements upon completion of an audit which will not happen before an initial extended deadline of May 16.

In a regulatory filing last November, the Nasdaq had given the transport service 180 days to increase its share price or risk being delisted from the US exchange. This gave Swvl until May 1, 2023, to raise its share price over USD 1.00 per share for at least 10 continuous days before it is informed that it may be delisted.

Although Swvl is currently trading at USD 1.18 per share, down from its USD 10.00 debut, its stock has consistently traded below USD 1.00 per share since the third week of last September. A deficiency notice is sent by the index to any firm whose share price stays below USD 1.00 for 30 consecutive business days in accordance with Nasdaq delisting regulations. The listed company then has 180 calendar days to raise its share price beyond the minimal requirement, failing which it will be delisted.

The Nasdaq issued the Cairo-born mass transit app its second delisting warning in January after the market value of its listed securities fell below the threshold USD 50 M. To avoid being delisted from the Nasdaq, the company has until July 10 to increase its market value to over USD 50 M for 10 straight days. To do this, the firm would need to grow its current market cap more than eightfold.

Beyond stock market turmoil, Swvl’s losses doubled during the first half of 2022 despite strong sales growth due to increased costs and costs associated with its Nasdaq listing, and in July the company was projecting losses to double to USD 90 M for the year.

Last month, the company announced the creation of a strategy committee “to explore and evaluate potential strategic alternatives.” The business said that it was thinking about “corporate sale, merger or other business combination, a sale of all or a portion of the company’s assets, strategic investment, new debt or equity financings or other significant transactions.”

Swvl was compelled to make significant layoffs last year in an effort to right the ship, following a raft of acquisitions that brought Shotl, Viapool, and Door2Door into its fold. It has stopped some of its less lucrative routes, cut back on CEO pay, and slashed headcount by more than 50 percent. Late last year, it was reported that Swvl had stopped operating in Pakistan, as part of a shakeup that also entailed nixing deals.

According to a filing earlier this year, Swvl announced it will discontinue its acquisition of the Turkish mobility company Volt Lines, which it finalized last year. This was the second deal that had fallen through recently; last July, Swvl and UK company Zeelo cancelled a planned acquisition due to unrest in the financial markets.